Monday, May 31, 2010

Imagine a world where there are copay's and other cost sharing for health care. Go to a doctor, pay a fee. Get a prescription filled, pay a fee. Have an X-ray, pay a fee. Need something major like a new hip or cataract surgery, use a health insurance plan to pay for it.

Pretty far-fetched, right?

This is a system our neighbors to the north may find in the not too distant future. Because of an aging population and budget deficits, the Canadian provinces are considering copay's and allowing private insurance for major procedures.

Healthcare in Canada is delivered through a publicly funded system, which covers all "medically necessary" hospital and physician care and curbs the role of private medicine. It ate up about 40 percent of provincial budgets, or some C$183 billion ($174 billion) last year.

Spending has been rising 6 percent a year under a deal that added C$41.3 billion of federal funding over 10 years.

Perhaps they need to ask Obama how he was able to expand health care for everyone and not add one dime to the deficit.

Other problems include trying to control independently set salaries for top hospital executives and doctors and rein in spiraling costs for new medical technologies and drugs.

Ontario says healthcare could eat up 70 percent of its budget in 12 years, if all these costs are left unchecked.

Now that's a novel idea. Control health care costs by limiting the salaries of health care providers.

Scotia Capital's Webb said one cost-saving idea may be to make patients aware of how much it costs each time they visit a healthcare professional. "(The public) will use the services more wisely if they know how much it's costing," she said.

"If it's absolutely free with no information on the cost and the information of an alternative that would be have been more practical, then how can we expect the public to wisely use the service?"

So when health care is free there is no incentive to keep utilization in check.

As deflated as I'm sure she (he?) must feel over this turn of events, I have to say that the "local National Health Service branch's refusal to pay for breast augmentation surgery, at a cost of £2,300 ($3,300)" strikes me as fitting, given that "human rights violations" aside, this kind of surgery would almost never pass the "medical necessity" test.

In related news, the patient, currently known only as "C," was also denied her (his?) request for a name change to "DD."

The full effect of Obamacare (Patient Protection and Unaffordable Health Care Act) has not fully been scoped out yet. But over the next few months the early stages of Obamacare will be phased in.

First on the agenda is doc fix. In order to "not add one dime to the deficit" the folks in Washington voted to cut Medicare provider payments by 21% with the idea they would be added in via a separate bill that of course WILL add to the deficit.

So far they have not voted the "fix" so starting on Tuesday 6/1/10 Medicare providers will make a financial decision about Medicare patients. Will they continue to see them or not? Will Congress vote another spending bill to fix what they are taking away from the docs even though there is no money in the bank to pay the docs?

Then in June (or possibly July) the yet to be fleshed out national risk pool will hit the streets. So far DC has not told us what the benefits will be, what the premiums will be or which conditions are considered to be pre-existing.

But other than that . . .

Kiddie coverage enters the scene in September when carriers must cover all children under the age of 18 regardless of pre-existing conditions. No details on that one either but carriers are already hinting at much higher rates (possibly 3x current rates) and new restrictions on children's health insurance policies.

The next big roll out will be mostly invisible to the public but will create even more frustration for carriers, agents and those wishing to purchase individual health insurance in the open market.

Starting in 2011 the health insurance companies will be held to strict guidelines on payout to policyholders. Companies offering individual major medical coverage must return at least 80% of the premiums in the form of claim payments.

This should not be a big deal since most carriers are already paying out somewhere in that ballpark any way but it comes with some barbs. Washington has put carriers on notice that premium rate increases will be closely monitored and the requested increase may not be approved. They also have yet to fully define what will and will not be allowed in the loss ratio computation, nor have they dictated what will happen if the carrier misses the mark and only pays out 78%.

Claims are not an exact science but global claims can be predicted on a large block but even then, only to a point. Beyond that the only thing certain is that they will fluctuate.

A continued recession will put even more upward pressure which will make life miserable for all.

A mandated loss ratio may seem like a good thing but it has adverse consequences. If health insurance companies are required to pay out "X" but their premiums are limited to "Y" then they will have to find creative ways to stay in compliance.

Here are some things that will happen, some of them starting before January of 2011.

Carriers will look to cut administrative costs any way they can. This means fewer bodies in home office dedicated to underwriting and customer service as well as reduced hours. That translates into a longer underwriting queue on new applications, and much more difficulty on the direct human contact customer service side. Policyholders who want to talk to a live person will find restrictive hours and longer waits.

Many carriers will outsource a lot of their operations, including customer service, to overseas operations. This translates into more layoffs in the 57 states.

I fully expect underwriting will become tougher leading up to 2014 when carriers will be required to insure anyone regardless of their health. Medical conditions that can currently be covered will result in more declinations on submitted applications. In other words, if you have a pre-existing medical condition that is workable now you may not be able to find coverage at any price between now and 2014.

The Socialist ideal of providing health insurance for everyone while promising to make premiums more affordable is a cruel joke that was sold to the voting public as part of a campaign promise. The government already tried making home mortgages available to anyone regardless of ability to pay and we know how that played out. Now they want to do the same thing with health insurance.

Saturday, May 29, 2010

Rather than take a principled stand on whether or not to extend the extension, Nancy and Harry have bailed in favor of a long, peaceful Holiday Weekend, secure in the knowledge that at least they're insured:

Friday, May 28, 2010

OKaaay, so Thursday I attended a briefing on the Mental Health Parity legislation – the law enacted in 2008, for which "interim final regulations" were published in February 2010.

The moderator explained that to comply with the law, insurers and self-funded plan sponsors must first compare how their plans reimburse for expenses other than mental health treatment. That's so they'll know what to do to achieve "parity". Parity: "The quality or state of being equal or equivalent" (Merriam-Webster) Simple everyday concept any school child will grasp.

Stick around, we’re not finished.

Turns out the legislation defines the required parity standard that insurers and self-insured plan sponsors must use. Mental health expenses must be reimbursed using the predominant cost-sharing method in the plan being tested. And the law helpfully defines "predominant" as the method used for two-thirds of the reimbursements in the plan. Say there’s a deductible and then the plan pays 90%. Mental health expenses must be reimbursed at the same 90% after the same deductible.

Uhhh, now where you going? We're still not finished.

See, most group plans, aren’t that simple. The large majority of privately-insured people are enrolled in group plans. Most group plans use a variety of cost-sharing techniques. In fact, it's estimated (the moderator said) that a very large number include deductibles, AND copays, AND coinsurance in a variety of ways. An office visit or a prescription for example might be reimbursed at 100% after a $20 copay. Hospital outpatient expenses might be subject to a deductible, and then paid at 80%. Inpatient expenses might be paid at 90% after a per-confinement copay, or after a deductible - or without either a copay or a deductible. And so it goes. It turns out that there are a great many plans in which most (or even all) expenses are subject to one or another form of cost-sharing and yet NONE constitute 2/3 of the reimbursements. In other words, for these plans there is no "predominant" cost-sharing method.

Well, so what, you might well ask?

Well, so this: the law further requires that, if there is no predominant cost-sharing method, the plan must reimburse mental health expenses at 100%. So in these common group plan design types, "parity" does not mean "being equal or equivalent." Instead it means that mental health benefits must be reimbursed BETTER than most other types of expenses.

Recently, I attended a training session for United HealthCare's new line of small-group (2-50 lives) products. As these things go, it was reasonably well-done: not too long or wonky, plenty of time for questions, and cookies and brownies available to help pass the time. For me, though, the most important part was the concepts and vision that I see embodied in this new line; regular readers know that I'm no shill, but there are some important lessons to be gained, and a number of questions that will be resolved only with the passage of time.

Basically, "Multi-Choice" (as it's called) seems to be an evolutionary (not revolutionary) outcome of UHC's All Savers program. For many, many years now, the basic principle of group health insurance has been "defined benefit;" that is, we look at what's covered, what the co-pay amount and deductibles are, that kind of thing. Then we tweak those to fit the employer's (and, to a lesser extent, the employees') budget. Hence, shopping every year at renewal.

Multi-Choice (M-C) works a bit differently. First, UHC considers this a "strategy" as opposed to a "product." And indeed, that seems apt: in this market, the carrier (like most others) offers a dizzying array of configurations (up to 150!). By contrast, M-C offers but two: Package A and Package B. What they've done is cut the 150 different options down to 30 or so, and then bundled them. Each "package" offers a couple of dozen or so different plan designs, from low deductible co-pay plans to high-deductible HSA's (and pretty much every point in-between). An employer picks a package, and then chooses a few different options that will be offered to his employees. For example, he might choose Package A, and select plans 3, 7 and 15 as choices for his employees. Each person chooses whichever plan design best suits, and that's that. The employer is obligated to pay a percentage of the premium, but his total cost is understood and agreed upon at the outset: he doesn't much care who chooses which product because his contribution has already been defined.

The other interesting, and perhaps unnerving, thing is how prescription drugs will be covered. Currently, an employer chooses an underlying health plan and one of several different rx options. That will go away under M-C: there will be just the one option, called "Specialty Pharmacy." I must confess that I don't yet fully understand all the intricacies of this particular new design, but I'll do my best to communicate the general idea: medication is one of the biggest drivers of health care costs (and, as we know, health care costs drive health insurance costs). According to UHC, "specialty medications" (e.g. injectibles) are used by less than 1% of its insureds, but represent an astonishing 20% of its pharma claims (I suspect that this ratio holds pretty much true with other carriers, as well).

That's a lot of expensive med's.

So the new design has whatever out-of-pocket (OOP) accrues to the underlying medical plan, plus an additional OOP for med's. This is true of not only the co-pay plans (to be expected), but the HSA plans, as well. So one could meet one's high deductible health plan's deductible, and still experience additional costs for specialty medications.

Is this fair?

I really don't know.

On the one hand, I'm reluctant to use the term "fair" when talking about insurance, but in this case, I have to give it some weight. I don't have a problem charging more for smokers, or the morbidly obese, or those who engage in other less-than-healthy lifestyle choices. And I kind of like the idea of rewarding those who exercise regularly.

But:

One of my clients has MS. We've been trying to move that group for a while now, but have always run up against at least one of two problems: either the rate for the new carrier was higher than even the existing plan's renewal, or the new carrier's policy on MS med's was much more restrictive. Sometimes both. Obviously, Tom is one of those "1%ers" and, as such, a part of "the problem." No argument. My problem, though, is that MS, unlike, say, lung cancer or HIV, is not a behavior-driven or -caused medical condition. There's no food that he should have avoided, or loaded up on. No special exercise regimen or other lifestyle choice that will ward off MS. It's like blue eyes or brown: it's not something over which one has any control.

But that means that, under one of these new plans (and I'm not picking on UHC here: I truly believe that this is where we're heading, and Medicare already does this) Tom's total out-of-pocket could be an additional $3500 over and above the high deductible built into his employer's HSA plan.

And there it sits: I don't have a resolution. I understand that pharma represents a huge chunk of health care (and hence, insurance) costs. And one way to rein that in is by taking the high-end med's for very small subsets of insureds "off the table" (or at least to a different end of the table). But there's no "magic bullet," no operation or lifestyle change that would alter Tom's medical predicament.

HHS Sebelius is leading the cheer for employers to expand coverage before the law requires them to do so. But there is a problem. Employers aren't listening.

According to the NY Times, Sebelius wants employers to change their plans to include children under age 26 in advance of the September mandate.

And she wants them to absorb most, if not all the cost.

But James P. Gelfand, director of health policy at the United States Chamber of Commerce, said: “I would not expect businesses to jump at the chance to change their health plans sooner than required. It’s more important for businesses to comply with the law and control costs than to score points with officials in Washington, D.C.”

For some reason the folks in DC seem to think all they need to do is proclaim it and their loyal subjects are willing to bow down and comply.

Either they forget, or have no clue, that when something is going to increase the cost of doing business owners and managers can't just snap their fingers and poof it happens. Unlike Washington, businesses can't spend money they don't have.

Mr. Gelfand said that healthy young people “can often get insurance very cheaply on their own.” He expressed concern that young adults who sign up for “mom and dad’s employer-sponsored plan” were likely to be sicker than average, and therefore more costly to cover.

Bingo.

But does Washington get it?

Ms. Sebelius said she met Thursday with a handful of insurance executives and urged them to hold down premiums and work with the Obama administration to carry out the law with a minimum of disruption to existing insurance markets.

At the meeting, Ms. Sebelius said, insurers warned that “rates are now at a crisis point,” and that “more and more people are dropping coverage because of the increase in prices.”

“The worst of all worlds is to have more Americans driven out of the market in the next couple of years,” before major provisions of the new law take effect in 2014, Ms. Sebelius said.

Thursday, May 27, 2010

Almost exactly 10 years ago, I was involved in a pretty bad auto accident. A young lady who wasn't paying attention thought she could beat a light, and - both cars travelling about 45 miles per hour - we collided almost head-on. Both cars were totalled.

We both walked away.

Undoubtedly, the fact that both vehicles were roughly the same size and weight helped, but I credit the fact that we were both wearing seat and shoulder belts as the primary reason we lived, let alone walked away with nary a scratch.

In order to avoid "adding one dime to the deficit", Obamacare (Patient Protection and Unaffordable Health Care Act) had to play shell games with the funding. One way was to cut pay to doctors who treat Medicare patients by 21%.

In doing so they stripped billions out of the cost of Obamacare by projecting a $200 billion savings by cutting Medicare. The game plan was to add those billions back in via a separate bill termed "doc fix".

Problem is, they haven't yet "fixed" the problem and the docs are no longer joining hands with Congress and signing Kum Ba Ya.

Yesterday during a routine doctor visit there was a flyer advising patients to call their Senator and protest the Medicare cuts. If the cuts go through, this practice would have to limit the number of Medicare patients they treat and probably stop accepting new ones.

For the third time this year, Congress is scrambling to stave off a hefty pay cut to doctors treating Medicare patients - even as the Obama administration mails out a glossy brochure to reassure seniors the health care program is on solid ground.

The 21.3 percent cut will take effect June 1 unless Congress intervenes in the next few days. Recurring uncertainty over Medicare fees is making doctors take a hard look at their participation in a program considered a bedrock of middle-class retirement security.

Don't mess with the gray panthers. They are a large and vocal group. As baby boomer's age into the system not only will they grow in number but it will put even more financial stress on an already leaky system.

"We will not have that cut," House Speaker Nancy Pelosi, D-Calif., vowed Wednesday.

If Princess Nancy is to be believed, then that means the funding has to come from somewhere. There are only three ways to keep Medicare in play.

"In the past two years, (lawmakers) keep coming up to the deadline - or a little past it - and waiving the cuts for shorter and shorter periods of time, which makes us uneasy," said Dr. Susan Crittenden, a primary care physician practicing near Raleigh, N.C.

"The current uncertainty about what the fee schedule will be, and whether at some point there will be a 20 percent cut, makes it harder to accept new Medicare patients," Crittenden said.

This uncertainty is what is prompting many docs to fire a shot across the bow of Obamacare.

Economist Marilyn Moon, a former Medicare trustee had this observation.

It's irresponsible" that the health care law left such a major issue unresolved, she said, while at the same time claiming to reduce the federal deficit.

Irresponsible is a good word.

So is liar, as in say anything to gain voter support then do what you want afterward.

Meanwhile, at a Capitol Hill news conference Wednesday, the Obama administration unveiled a brochure explaining the benefits of the new health care law to seniors. The government is mailing it to more than 40 million Medicare recipients, and Republicans are criticizing it as political spin. The law, says the brochure, "keeps Medicare strong and solvent."

Yeah, and if you like the health care plan you have now, you can keep it.

■ Ceridian reports that our CongressCritters are mulling yet another extension of the so-called COBRA subsidy (i.e. hidden tax); the current program is scheduled to sail off into the sunset next Monday (the 31st). It's still pending, so who knows.

The former argument fails to consider that, if a state has no standing to challenge Federal over-reach in blatant disregard of the 10th Amendment, then who does? Anyone? Bueller?

The latter seems silly on its face: if a citizen of Virginia doesn't agree with a particular law, then that citizen is free to a) vote with his/her feet or b) run for office and change it (there may be other remedies, too, such as a voter initiative effort).

I have little doubt that we'll see similar responses to the suits brought by the other 19 states.

Trying to make a budget? Have no idea how much money you need to cover your expenses? No problem. The state will decide how much you can earn.

According to KansasCity.com the states will be given broader powers in Obamacare (Patient Protection and Unaffordable Health Care Act).

Decisions at the state level will determine how much some doctors and hospitals are paid and how much “free” care should be provided to people who choose to go without insurance.

Well that is a relief. Doctors and hospitals will not only be told how much they can earn but will also be assigned a quota for rendering free health care.

I am sure they are happy about that.

About 87,000 people who are uninsured will qualify for Medicaid under new income guidelines. Kansas’ share of those costs are expected to be offset by higher federal matching Medicaid rates and a shift of high-risk, high-cost patients from state programs to private insurance.

Paid for by federal dollars.

That means folks outside of KS get to help them pay their bills.

But here is a new wrinkle in this health insurance scheme. "High cost patients will be shifted to private insurance".

Once again, that means you and I get to pay for those that are the sickest.

Apparently the folks in DC who think they know everything have decided that health insurance companies who are on the edge over Obamacare (Patient Protection and Unaffordable Health Care Act) should just exit the market instead of merging with stronger carriers.

Yeah, that makes a lot of sense.

Instead of providing a sound base going forward, Washington wants to encourage those marginal players to simply exit the market.

The antitrust division "is committed to vigorously, but responsibly, scrutinizing mergers in the health care industry that appear to present a competitive concern," Varney told a joint meeting of the American Bar Association and the American Health Lawyers Association.

"If we determine that our initial concerns were well-founded, we will not hesitate to block the merger or to require the settlement concessions necessary to protect consumers," she added

How is encouraging weaker players to abandon the health insurance market a consumer protection?

Of course the Obama House and members of Congress have already demonstrated over and over again they have no clue about competition. In their mind, if a carrier dominates a geographic area it is prima facie evidence there is no competition.

Clueless.

Varney also put hospitals on notice that the government will investigate mergers "likely to reduce competition."

Ooooh . . . hospitals that are faltering will not be allowed to merge with stronger hospitals.

So much for saving or creating jobs and expanding the availability of health care.

New competitive insurance markets are a cornerstone of President Barack Obama's health care law. They'll open for business in 2014 to serve consumers who buying their policies directly, as well as small businesses.

Varney said the goals of health care overhaul "cannot be achieved" if insurer mergers reduce competition, or if big companies use their market clout to keep out upstarts.

Here is a clue.

Come 2014 there will be fewer health insurance companies and fewer plan choices, regardless of what the emperor wants. And there will be no upstarts.

In the last 5 years or so, even before Obamacare, there have been fewer new entrants in the individual major med and none that I am aware of in the employer group market. The only new players in individual major medical are Cigna and Aetna and both of those will probably bail before 2014.

New taxes are on the way to save or create health insurance subsidies. Lawmakers are scrambling to find ways to take more money away from the earners and redistribute it to those who still don't have jobs.

One way to fund health insurance subsidies and other pet projects is to levy a new tax on the latest villain . . . oil.

The tax increase is part of a larger bill that has grown into a nearly $200 billion grab bag of unfinished business that lawmakers hope to complete before Memorial Day. The key provisions are a one-year extension of about 50 popular tax breaks that expired at the end of last year, and expanded unemployment benefits, including subsidies for health insurance, through the end of the year.

Grab bag. Now that is an interesting term you don't hear every day.

A proposed tax on oil would increase the tax from the current $0.08 per barrel to $0.32 per barrel.

That's a 400% increase in taxes.

President Barack Obama and congressional leaders have said they expect BP to foot the bill for the cleanup.

"Taxpayers will not pick up the tab," Senate Majority Leader Harry Reid, D-Nev., said Monday.

I am assuming they said this with a straight face.

You need to understand that even though oil companies would have the responsibility for REMITTING the tax, they are not the ones who will actually pay it. Anyone who buys oil related products, that would be you and me, would FUND the tax for the oil companies by paying higher prices for those products.

Let's dispose of the silly meme that health insurers "ration" care in any way. They cannot make a person undergo a procedure, nor can they withhold treatment. Insurers can only decide, within the contractual terms of the policy, whether or not they will help to pay for any such care. And let's remember, the most egregious claims denier of all is not Aetna, or Blue Cross or United Healthcare. It's Medicare. It's worth noting that Medicare itself rations care (through, for example, its power over providers).

In the event, once we officially transition to a nationalized health care scheme, folks will still need care, they just won't be able to find it here. So what to do? Well, we've discussed medical tourism many times here, but one question that keeps cropping up is "okay, smart guy, I get it. But how do I find where to go?"

And so they have; click over to their site for a wealth of information on such things as fertility, heart surgery, even cancer treatment. Regular readers know our obsession with transparency; this site lists not only providers, but how much they charge. Is this the future of health care?

Actually, according to CMS Guy Jack Cheevers, folks covered by "Part D prescription drug plans will see 50 percent savings on their brand name and some authorized generic drugs when they enter the coverage gap, or donut hole, during 2011."

Sunday, May 23, 2010

OK, so the AMA says “Competition in the health insurance industry is disappearing.” It cites growing “concentration” by market and pleads for “the Department of Justice (DOJ) and state agencies to more aggressively enforce antitrust laws that prohibit harmful mergers.”

The AMA report is not public unless you want to pay $150 for it or unless you are one of the 17% of doctors who belong to AMA. So at least a couple of questions come to mind:

1. In how many of those concentrated markets is the dominant player Blue Cross? I suspect the majority of them. And therefore I wonder if the AMA’s complaint is not really about some "absence of competition", but instead a complaint about Blue Cross. What makes Blue Cross such a popular choice for customers? And why does AMA care?

I also suspect the study shows there are in fact multiple competing insurance companies that dominate in different markets. Which prompts a second question:

2. Is it true that company A or C or U can be dominated by the Blues in some areas, but can dominate the Blues in other areas? Are they not the same companies with the same strengths everywhere? Yes? No? If one company is clearly dominant, why is there any competition at all, anywhere? If no company is clearly dominant, why is there “absence of competition”?

The only, or even the most likely, answers to these questions do not automatically involve “the absence of competition” or even the prevalence of “mergers”. (There are physician practice and hospital mergers too). And why should the only or even most desirable response be that “the Department of Justice (DOJ) and state agencies more aggressively enforce antitrust laws” ?

The answers to these questions are not stated in the AMA article and the study is not exactly public. Doesn’t it make sense that, before anyone accepts the AMA findings as described by some AMA spokesperson, AMA permit people to, you know, read the study itself to see whether it addresses these (and other) questions?

3. Finally, it’s a fact that physicians and hospitals agree to generally higher discounts for Blue Cross than they do for other insurers.

That's important because discounts affect net cost. The higher the discount, the lower the net cost. The lower the net cost, the more business an insurance company is likely to write.

So I wonder if doctor and physician negotiating behavior isn’t largely responsible for the Blue Cross cost advantage in the first place - which then leads to the greater market share that AMA is complaining about.

By setting up Blue Cross to win on lowest net cost, perhaps the doctors and hospitals have managed to channel the greatest number of patients to the very organization - Blue Cross - to whom they have given the greatest discounts. Doesn’t this cost the docs and the hospitals more? And then the AMA funds a study so they can complain about the "absence of competition". In the end, I wonder if the AMA is pushing this study as a means to defend their incomes, and not because of any “absence of competition” that is “not in the best economic interest of patients.” I wonder if the AMA isn’t worried more about the economic interests of doctors. I wonder if that isn’t the real reason AMA is so exercised about “concentrated” markets? (probable meaning: “Blue Cross has too many members”). I wonder.

In Chicago Blue Cross Blue Shield covers 66 percent of the market - more than any other provider in a metropolitan area. In 54 percent of metropolitan markets at least one insurer had a market share of 50 percent or more, according to a study by the American Medical Association. “An absence of competition in health insurance markets is clearly not in the best economic interest of patients,” said Dr. Rohack of AMA.

Of course, Dr. Rohack must share some of the blame for this kind of stupidity.

Anyone who has even a smattering of knowledge of business economics knows when one company, in this case Blue Cross, has a lions share of the market it is BECAUSE they are more competitive than other health insurance companies.

Consumers are prone to premium increases with insurer monopolies.

For starters, there are no true monopolies in health insurance. Even if there were, premium increases have nothing to do with a monopoly.

In this case, Blue has 66% of the market. This means that X number of other health insurance companies make up the remaining 34%.

If Blue were to exercise their magical "monopoly" power and raise rates by (picking a figure out of the air) 39%, this would leave the door open for one of more of the carriers that make up the other 34% to swoop in and deprive Blue of their market share.

They started raising prices to the point that new carriers could come in an take away market share. They still are a dominant player but that is mostly by reputation. Anyone who shops and compares plans and prices will easily see there are many other options that deliver more value than BCBSGA.

When you hear someone say that market dominance is proof there is no competition you can look them squarely in the eye and proclaim they are an idiot.

Yes, you read that correctly: the government-issue doc's so esteemed by our own proponents of nationalized health care missed a half-foot long toilet brush handle protruding from a rather obvious place. There is no humor here, only pathos:

"Cindy [the patient] ... spent more than ten hours in surgery at Nottingham's Queens Medical Centre but died from massive blood loss."

There are other less obvious costs, as well. FoIB Lyndsi Thomas directs us to this piece in the well-respected City Journal, where the Manhattan Institute's Center for Medical Progress' Paul Howard "touches on the tax levied on businesses for the partial federal subsidy that they receive for each retiree, the proposed Medicare cuts, $5 billion fund set up to offset health-care expenses for early retirees, and generally how the new law will cost taxpayers far more than expected and send health-care spending into the stratosphere."

The powers that be in Massachusetts have their own version, a bit more Russell Crowe and a bit less Kevin Costner.

In this version, "wealthy" hospitals will be required to "share" their wealth by "contributing" to a fund to help make health insurance for small businesses more affordable.

The bill would let businesses with 50 or fewer workers form cooperatives to purchase insurance at a lower cost. Another provision presses insurers to spend at least 90 percent of premium dollars on care and 10 percent or less on administrative costs.

Senate President Therese Murray said the bill, which passed on a 33-4 vote, will ease instability in the insurance market, smooth out annual fluctuations in premiums and require insurers offer affordable small business plans.

Yes, mandates work so well. That is why attempts to squeeze health insurance carriers in Massachusetts has already delivered more competition and more affordable health insurance.

NOT!

The debate comes a day after the state's four major health insurers said they lost $116 million in the first quarter of the year because of an ongoing dispute with Patrick on small business premiums.

Let's review for those playing along at home.

Four years ago, then Governor Romney signed a new bill aimed at lowering health insurance premiums and providing health insurance for everyone. In that time premiums have risen to the point of making health insurance premiums in Massachusetts among the highest in the nation. There are fewer choices for consumers, not more. Carriers are losing money and threatening to withdraw from the market.

Now the Mass idiots want to increase costs for hospitals which will be paid by . . . consumers and health insurance carriers which will . . . lead to even higher premiums.

That's less than one in five doc's, a very small minority of providers. So how did they "earn" the right to speak for all the rest? The simple answer is, they didn't. What they have done is leverage a mutually beneficial (and cozy) relationship with Washington into a much more powerful voice than deserved.

How did they accomplish this, you ask?

Remember those "diagnostic codes" which are used by providers and insurers (including Medicare) to determine reimbursement rates (not costs) for given procedures? Well, the AMA owns the exclusive rights to these codes, on which they earn royalties, and on which every provider is required to rely if they wish to be paid for services rendered by a 3rd party (i.e. insurance). As long as they scratch Congress' and Obama's backs, they continue to reap that benefit.

Get that? Go ahead and quit that low-paying (or high-paying, for that matter) job, because the rest of us will carry your load. One wonders what happens when we reach that tipping point, though: who pays the piper when no one's working? As Margaret Thatcher once thoughtfully observed: "The problem with socialism is that eventually you run out of other people's money."

If you are looking for a job, especially one that provides group health insurance, don't be surprised if you come up empty. The intent of Obamacare (Patient Protection and Unaffordable Health Care Act) was to make health insurance more accessible and more affordable.

In fact, it does neither.

Many large companies have already crunched the numbers and figured out it will be cheaper to drop health insurance and pay a fine than it is to continue the much coveted employee benefit.

Thanks to Obamacare, low-skilled job seekers will find it even harder to find work. And low-income areas will find it even more difficult to attract new businesses. That’s the lesson drawn from a new analysis by White Castle, the iconic hamburger chain.

Numbers crunchers there looked at how Obamacare provisions would affect the company’s bottom line. Of particular interest were provisions that hit employers with a $3,000 per employee penalty—even if they offer health insurance—for workers whose household income is low enough and they get subsidized health coverage through a government-run insurance exchange.

Curiously, the penalty for hiring and offering coverage to a low-income worker is 50% higher than the Obamacare penalty ($2,000 per employee) for NOT offering coverage.

What kind of idiot thought that one up? Assess a larger fine for compliance than for non-compliance.

“The net result would be higher unemployment for low- and moderate-income families and higher health insurance costs for their co-workers—the exact opposite of what the bill’s proponents claim is their goal.”

As the White Castle report shows, Obamacare is more likely to hurt than help low-income workers. Additionally, employer penalties create incentives to drop coverage altogether, making a mockery of President Obama’s promise that “if you like it, you can keep it.”

This is what happens when you put someone in charge who lacks real world experience.

The problems in Massachusetts are just beginning to surface. The land of Chappaquiddick and RomneyCare is on the verge of having health insurance companies pull out of the game.

Boston reports that the 4 largest health insurance carriers lost more than $150 million in the first quarter of this year.

The cause?

Rate caps.

Blue Cross Blue Shield of Massachusetts, the state's largest health insurer, reported a $65.2 million net loss for the three months ending March 31. Its operating loss was even steeper, $95.5 million. The company drew $55 million from its reserve to cover the anticipated losses from the state-imposed premium cap in the second quarter, accounting for the majority of its operating loss.

In business, top down management almost never works, at least not as planned. Anyone who has worked in the corporate world for any time at all knows the brightest minds are not in home offices . . . they are in the field, taking the pulse of the client base.

But Washington either never learned this (not surprising) or simply doesn't care.

You pick.

The latest DC saga comes in the form of, "I'm from the IRS and I am here to help you".

Yeah, that's going to work real well.

The AP reports the IRS is going to launch a campaign to "sell" small business on the idea of providing group health insurancefor their employees and taking advantage of the (for a limited time only) tax credit.

The White House estimates up to 4 million small businesses may qualify for the tax credit, but it's not clear how many will be eligible. To begin with, they have to provide health insurance — and many small employers don't. To qualify, companies must pay at least 50 percent of their workers' premiums.

Other than the fact that very few business owners trust Washington, coming up with the cash to fund health insurance is a problem during this deep recession. Tax credits are only meaningful if you have enough revenue to add the expense and headache of providing health insurance for employees and their families.

I wouldn't expect DC to understand that given their track record.

Go back a dozen years or so and Washington decided it was a good idea for everyone to own a home, and pressured banks to make loans to people regardless of their ability to actually, uh, qualify for the loan.

We know how well that worked.

More recently we had Cars for Clunkers. This one worked so well the program ran out of money in a few days and Congress had to refill the coffers with money they didn't have.

But why wouldn't it work when you can trade in a car worth $500 and get $4500 in trade in value?

Following the banking collapse and unconstitutional bailout, Washington once again flexed their fake muscles and demanded that banks resume loans to businesses in order to spur the economy.

What they failed to take into account was a lack of demand for loans, based on the sluggish economy.

Sunday, May 16, 2010

A stealth, 15 member panel appointed by the king, I mean president, to make sure Medicare doesn't spend too much money on health care.

Beginning in 2015, Medicare spending is now supposed to be limited, on a per capita basis, to a fixed growth rate, initially set at a mix of general inflation in the economy and inflation in the health sector. Starting in 2018, the upper limit is set permanently at per capita gross domestic product growth plus one percentage point.

Look at what happens in 2018. Total spending on Medicare will be limited to the GDP rate plus 1%.

What would the cap be if the IPAB had been in place since 2007?

In 2007 the GDP grew at a rate of 2.53%. In 2008 is was a negative 1.83 (-1.83) and in 2009 it was .18.

That means the death panel, I mean IPAB, would have limited total Medicare spending to 3.53%, -.83% and 1.18% for each of those years.

To hit its budgetary targets, the IPAB is strictly limited in what it can recommend and implement. It can’t change cost-sharing for covered Medicare services. Indeed, it can’t change the nature of the Medicare entitlement at all, or any aspect of the beneficiary’s relationship to the program. The only thing it can do is cut Medicare payment rates for those providing services to the beneficiaries.

That means your Medicare doc agrees to take a pay cut.

How well do you think that is going to work?

Like it or not, managed care in the private sector works very well to control costs. In addition to saving money, medical providers that don't meet quality control criteria are voted off the managed care island.

But the government doesn't operate that way. Medicare and other health care entitlement programs will allow anyone into their program.

The federal government has never shown any capacity to exclude otherwise qualified suppliers of services from Medicare. Indeed, the whole point of the fee-for-service model which Congress has so jealously protected over the years is that beneficiaries get to see any licensed provider of their choosing, to whom Medicare pays a fixed reimbursement rate, no questions asked.

Well that's comforting.

But no fear. Going forward CMS can still allow anyone who is willing to work for less to treat Medicare patients.

Although it's an infrequent occurrence, insurance companies do go belly up. When this happens, it's up to the Department of Insurance in the state where the carrier is (was?) domiciled to swoop in an attempt to save the day. This is generally done by way of a process called "rehabilitation" which would probably make for an interesting (if overly wonky) post, but that's not why I bring it up.

Recently, the American Community Mutual Insurance Company found itself in dire financial straits, and was forced to withdraw from the marketplace. The Michigan Department of Insurance (DOI) has stepped in, and has assumed "operational control" of the company; that is, they're running the day-to-day operations while looking for a potential buyer (or whatever other mid- to long-range plan they hope to accomplish). When a similar circumstance overtook Shenandoah Life last year, the Virgina DOI immediately notified agents contracted to do business with ShenLife, warning us of dire consequences if we moved our groups to other carriers. What actual enforcement power they may have had in that regard aside [ed: none, really], they at least pro-actively looked to keep the marketplace steady.

Now comes word from FoIB Rick B that Michigan is apparently not following Virgina's lead in that regard. According to Rick:

"There are no flies on the Michigan Blues.

They are already offering agents $150 per-group commission incentives to get ACM groups to switch now through July 1, and $75 per group for those that switch between July 2 to Oct. 1. For individual plan members, they are reimbursing agents on the "A" commission schedule, 15%, for switchers."

So in addition to regular commissions for writing the group, some agents will receive special "signing bonuses" for deliberately undermining whatever efforts the Wolverine State's DOI might have in mind to salvage the harried carrier. As I replied to Rick, these guys give vultures a bad name.

Obamacare (Patient Protection and Unaffordable Health Care Act) has a new challenger from the torch and pitchfork crowd. The NFIB (National Federation of Independent Business) has joined a suit along with 20 states to challenge the constitutionality of Obamacare.

At one time NFIB was a supporter of the change you won't believe, but they backed down as this abomination took shape.

A groundswell of opposition to the law from small business owners prompted NFIB's decision to join the court challenge, said Karen Harned, a senior lawyer for the group. "The second the law was signed, NFIB was hearing from its members: 'What are you all going to do about this?'," said Harned.

What NFIB and early supporters of Obamacare heard in the rhetoric was more affordable health insurance.

What we got was more bureaucracy, higher taxes, more government intrusion and higher health insurance premiums.

Gosh, like nobody saw that coming.

The mandate is effective in 2014, when new competitive insurance markets open for business. Insurers will then be required to take all applicants, no longer allowed to turn away those in poor health. The government will offer tax credits to help middle-class households pay premiums. And Medicaid will be expanded to cover millions more low-income people.

According to government estimates, about half those to be covered by the new insurance scheme will find themselves on Medicaid. I have clients who have gone on Medicaid only to later return to private insurance once their financial boat is righted and they swear they will never go back.

Individuals who refuse to get health insurance will be hit with a tax penalty, although exceptions are allowed for financial hardship and religious reasons.

God told you not to buy health insurance?

The new law allows government "to regulate you just because you exist," said Danner. "If you can regulate this, where do you stop? Do you tell people, 'We are going to mandate that everybody exercise?' We think this is an overreach by the government. It goes too far, and threatens individual freedom."

Thursday, May 13, 2010

At a consumer-driven bulletin board to which Bob and I frequently contribute (Bob more than I, since he has more knowledge and experience), I recently became entangled in a kerfluffle involving the misuse of life insurance. The subject at hand (deconstructed here) stands on its own, but I'd like to revisit some fundamentals regarding how permanent (in this case, Whole Life) insurance policies work, and don't work.

The first concern is need: that is, how much life insurance is appropriate for a given individual (or couple, or family). This is paramount: without an assessment of the risk (i.e. the net financial cost of one's demise on one's family or business), it doesn't matter what kind of policy one buys. Simply buying a policy without regard to that underlying metric is a waste of one's time and money.

The second concern, then, is time-frame: that is, for how long will one need the insurance in force. Ideally, the appropriate amount is that which is in force on the day of one's demise. Often, this includes a mix of "term and perm" (permanent), and will be adjusted as one travels life's highway.

Finally, one arrives at the decision that at least some of the insurance will be permanent; to keep things simple, we'll assume it's Whole Life (WL). There are two basic kinds of WL, participating and Non-Participating, Par and Non-Par. Participating policies have a unique and useful feature called "dividends," and it is on these often misunderstood proceeds that we'll focus in this post.

In the life insurance world, "dividends" represent, essentially, a rebate: the insurance company, in determining the cost of insurance for a particular year, miscalculates and is obliged to rebate (or refund) any overage to its policyholders. The key point here is that these are miscalculations, and as such, are not guaranteed from one year to the next. Some companies point proudly to many years of miscalculating insurance costs, and thereby a long history of having to refund these overcharges. But they are equally quick to point out (as required by law), that these refunds are not guaranteed; that is, there is no certainty that next year will yield such a windfall, nor how much it might be.

In addition, these refunds are never to be expressed as "rates of return:" it would be inappropriate to classify a given refund as a percentage, or to imply that this is a valid ROI (return on investment). That's because participating whole life policies are not in fact, "investments," but "protection." The "percentage" is the carrier's rate of return, not the insured's. Anyone categorically stating that a dividend is guaranteed is, at best, misstating their nature and, at worst, lying about it. Which is not to say that dividends are a "bad thing," but simply one of many factors that go into the insurance buying process.

Why all this "inside baseball" about dividends and life insurance? Glad you asked:

If someone offers to you a life insurance plan with a "guaranteed" dividend, run - don't walk - away, because there is no such beast.

That's the simple, 25 word "mission statement" of the Health Wonk Review. Yet each time I host (and I'm sure others have noticed this, as well), there are more submissions that fall outside these guidelines than within. So for this outing, I chose to ruthlessly apply two rules:

Only posts which actually meet the criteria and included a summary would make the cut.

Uberwonk David Harlow reports on a Bay State initiative that will require providers to use certified EHR's, and what that portends on a national level.

■ IT

You think that hospital-issue gown lacks privacy? Peggy Salvatore thinks that some record-keeping schemes may be even more embarrassing.

Rich Elmore interviews Greg Parstons, the lead researcher and director for Accenture’s Institute for Health and Public Service Value, about health IT.

■ Economics

Of course Jason Shafrin headlines this category. He starts by recapitulating the conventional wisdom that economists abhor most forms of regulation. Then he asks whether economists would support the requirement that the FDA pre-approve all drugs for use in the U.S.

A Johnson and Johnson subsidiary's factory is shut down, and its products recalled, after an inspection found "dust, grime, and contaminated ingredients." Roy Poses takes to task the less-than-contrite CEO.

■ Trends

Victoria Kennedy puts down her own iPhone long enough to help us out with her Top 5 Health & Medical iPhone apps. Here's hoping that the crisis hotline number isn't busy.

Like John Goodman above, Maggie Mahar isn't too keen on how some cancer stat's are being misused. Her take is a bit different, though, and may well represent an interesting trend itself.

Is there a shortage of doc's, and if so, why? The Notwithstanding Blog has a unique take on why simply increasing the supply of med school students won't solve the problem.

■ And the Wonkiest of All

Austin Frakt submitted this masterpiece: "Making causal inferences in observational studies is more challenging than in randomized experiments. But econometric and statistical techniques have now improved to the point that a knowledgeable practitioner can draw causal conclusions from sound observational research. Though these techniques have already been employed in economics they have not been widely applied or appreciated in health services research. Given their utility and ease of application, that should end."

In true wonk-fashion, I ran this post through Google's translator (Wonkese -> English); click here for the result.

That wraps up this week's 'Review, please join us again on the 27th when we reconvene at David Williams' place.

NOT LONG AFTER President Nixon took the unprecedented step of imposing peacetime wage and price controls, the American people learned a basic economic lesson: Artificial controls don’t work unless underlying costs are controlled.

Four decades later, the Patrick administration is imposing controls on small business health insurance rates. The move will prove to be little more than an election-year reprise of Nixon’s failed effort.

Romneycare was passed in 2006 which was supposed to make health insurance more affordable by covering everyone.

Sounds good on paper but in reality, it doesn't work.

For sure, there are people who cannot truly afford health insurance and others who do not qualify based on their medical history. But the latter is not an excuse in Pilgrim country since the state has told health insurance carriers they are required to take anyone who can fog a mirror.

Those who feel they don't need health insurance (because they are healthy) don't buy it while those who are sick will only buy it when it less expensive to pay premiums than to pay for medical care out of pocket.

This type of business model doesn't work.

The Commonwealth Connector, an independent authority meant to act as an insurance plan clearinghouse, was established to provide real choices and information needed to evaluate options. In theory, an informed and robust marketplace would bend the cost curve and get more of the working poor and lower middle class insured.

Gosh this sounds familiar. Kind of like a recent campaign pledge.

But the plan is not working as sold.

First, the Connector focused all its energy on providing nearly free products to the indigent. In contrast, the Connector’s board seemed almost uninterested in market-rate products for small business employees.

The Connector revenues come from selling plans, and selling nearly free products was the path of least resistance. Unsurprisingly, 90 percent of the Connector’s operating revenue has come from the fee it earns for state-subsidized plans.

The words "selling" and "free" do not belong in the same sentence.

the Connector chose to build a top-down bureaucracy rather than leverage the broker and private market community. The quasi-governmental Connector has a $40 million annual budget and 45 employees earning annual salaries that average $100,000. Its board is heavily weighted toward government officials and unions.

Yeah, but $100,000 doesn't really go very far these days, does it?

Utah, the only other state with a health care exchange, demonstrates that there was another path forward.

Utah’s Health Insurance Exchange was started with a $600,000 appropriation and has no board and just two employees. The Exchange provides a technology backbone that enables private entities — brokers and businesses — to take advantage of consumer-based options.

Well yeah, but Utah doesn't have a lot of people so they only need two employees. And don't overlook the fact that Mormon's lead healthy lifestyles. I don't think they eat a lot of beans and lobster in Utah.

Fewer than 1,500 small business employees receive coverage through the Connector. In Utah, with a far smaller population, about 55,000 small business employees have purchased health insurance through the Exchange.

How could they do that without a public option? Everyone knows a public option is needed to instill competition and make premiums affordable.

But I am sure if the folks in Massachusetts hang in their long enough the federal government will bail them out.

Beyond keeping the “Big Kids” dependent on Mommy and Daddy, it also directly undercuts the President’s famous campaign promise that American families would see a $2,500 reduction in their annual premiums.

Now, we learn that family premiums will rise about 1 percent in 2012 just from this one provision of the new law. It will cost $3,380 for each dependent in 2011, according to this Associated Press report.

Wonder if Mommy & Daddy will pass that premium increase on to their children, or wait until they officially become adults at the ripe old age of 27?

But wait, there's more!

health insurance premiums will rise from Obamacare’s new taxes on drugs, medical devices and new insurance fees, plus new insurance rating rules and the yet to be determined health benefit levels that the imperial Feds say must be included an acceptable health insurance plan.

On Sunday's radio address, President Obama made some very strong comments about an insurance company attempting to rescind coverage of women who developed breast cancer. Although unstated in his address, the remark was appeared to be targeted at WellPoint.

Today's Wall Street Journal covered WellPoint's response, but the print version omitted the full text of WellPoint's letter. It makes interesting reading...

If you have a Georgia health insurance policy from Aetna, there are changes in the wind that you may not like. As a result of the Patient Protection and Unaffordable Health Care Act (Obamacare), the change you hoped for may not be the change you get.

The ink is hardly dry on the law and already Washington is trying to figure out what the law means, and how it will impact health insurance policyholders. In fact, they are making up rules as they go along.

Since Washington has no clue, neither do the health insurance companies. Most of the carriers are taking a wait and see approach before making drastic changes but some have decided to completely abandon the individual major medical market.

So far, Aetna isn't one of them but they are introducing some surprises that will make life difficult.

If you have an Aetna health insurance policy in Georgia, you have have already received a letter telling you of changes that will come about in July. Since Aetna did not bother to tell their agents about the letter, or the changes, we are finding out after the fact.

Here is what you can expect.

If your health insurance policy is more than 12 months old you will be getting a rate increase in July. Even if you just had a policy anniversary or age change increase you are getting another increase in July.

If your policy is less than 12 months old there will not be any changes until the 1st policy anniversary.

If you have an Aetna health insurance policy with doctor and Rx copays, your plan of benefits will change in July as will your rates. In most cases you will be looking at lesser benefits and possibly higher rates.

If you have a high deductible HSA plan there are no changes in benefits but rates may change in July.

The biggest changes will occur for those who have a Value plan or the $0 deductible plan.

We encourage anyone who currently has an Aetna plan to contact a knowledgeable agent that is familiar with plans from Aetna as well as other health insurance companies. In most cases, you will not need to change carriers or plans, but some will benefit from moving to a different plan with a different health insurance company.

Changing to a richer benefit plan within Aetna will require going through the underwriting process once more. Changing to a new health insurance company will require you to submit your medical information to a new carrier for review.

Frankly, some people who bought a plan they liked with Aetna will be stuck and will not have any options. If you chose a Value plan before you may be trapped in a new plan that has a higher deductible than before, fewer allowed doctor visits and no brand name prescription drug coverage.

And you may pay a higher premium as well.

You have every right to blame Aetna but you must also recognize the rules governing health insurance plans have been changed and not for the good. The folks in Washington who make the rules have no idea what they have done to have a negative impact on policyholders. Over the next few months as the new law phases in you can expect even more surprises.

Most will still be able to find affordable health insurance in Georgia, but they may have to look a little harder. That's where we come in. We represent all major health insurance companies in Georgia, California and Ohio and know how to find the best value.

If you have questions about health insurance, hopefully we have answers. If we don't have an immediate answer we know where to go to get a response.